Echo celebrates legal victory after two-year gagging order

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The Liverpool Echo staked hundreds of thousands of pounds on winning a landmark legal judgment against the nightclub promoter, Cream, which had tried to block the newspaper from carrying stories about its financial activities.

And now Echo has learned that its gamble has paid off.

According to insiders, the nightclub, which will have to pay both sides’ costs for the two-and-half-year legal battle, is facing the prospect of a bill of around £500,000.

In Monday and Tuesday’s editions, the Trinity Mirror-owned evening paper finally published details of the alleged financial activities by the club – which it has fought to reveal all the way to the House of Lords.

The resulting judgment is likely to make it easier for all British journalists to publish information gained from confidential sources.

The Echo’s original story was based on documents that had been obtained from the former financial controller of Cream, Chumki Banerjee, which revealed allegations of financial impropriety.

In July 2002, Cream obtained a provisional High Court injunction which banned the Echo from publishing the allegations. Cream’s legal team had successfully argued that the stories were based on a breach of confidence by Banerjee.

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The newspaper contested the injunction first at the Court of Appeal, and then in the House of Lords which finally lifted the order last week.

The resulting judgment means no one can now gag a newspaper when a breach of confidence is alleged – unless they can persuade a judge they are “more likely than not” to get the injunction upheld at trial.

Liverpool Echo editor Mark Dickinson said: “This is a tremendous victory for press freedom. We have argued from day one that our readers have a right to know the information we have been given about Cream, and that the story should be told in the public interest.

“The ruling by the House of Lords has also confirmed our contention that, following the Human Rights Act of 1998, it should be more difficult for interim injunctions to be obtained against the press.

“I think this ruling will be welcomed by newspapers up and down the land. The law lords have sent a clear signal that such interim orders should be granted only in circumstances in which the consequence of publication would be grave.

“After the Court of Appeal decision, there was a significant increase in the number of solicitors seeking temporary injunctions for quite spurious reasons. Happily, that developing trend will now be reversed.”

The story that Cream tried to ban revealed that the nightclub promoter had allegedly avoided tax bills and then made a cash deal with the Inland Revenue to avoid going to court.

Cream is now an internationally recognised brand that started off by promoting club nights in Liverpool and now releases CDs and promotes music events around the world.

Echo managing editor Chris Walker said: “At the time of these allegations, Cream was publicly proclaiming it wasn’t in this for profit -Cream was all about helping the people and city of Liverpool.

“But we have shown that at the same time it was ‘creaming’ off money for its own personal use”

THE LONG ROAD TO LEGAL SUCCESS FOR THE LIVERPOOL ECHO

January 2001 Liverpool Night club promoter Cream sacks its financial controller Chumki Banerjee. She made and removed copies of financial documents that were subsequently claimed to show “illegal and improper activity at the company”.

13 and 14 – June 2002 – Liverpool Echo publishes articles about alleged corruption involving Cream and a council official, based on Banerjee’s documents.

18 June – Cream seeks an injunction after the Echo questions it about other alleged financial wrongdoing.

5 July – High Court grants interlocutory order banning the Echo from publishing information from the confidential documents. The case hinges on whether Cream would be “likely” to get the injunction upheld at trial. The judge said: “I do not say it is more likely than not, but there is certainly a real prospect of success.”

The Echo decides to appeal.

January 2003 – The Court of Appeal sides with the original judge on his definition of the word “likely”.

June 2004 – The Echo takes its legal fight to publish the allegations of wrongdoing at Cream to the highest court of appeal – the House of Lords – during a two-day hearing.

14 October – The Law Lords side with the Echo and raise the bar for all future gagging injunctions against newspaper. In future, those seeking provisional injunctions must prove they are “more likely than not” of success at trial rather than the original ruling, which stated they had to have “a real prospect of success”.

15 October – The Echo splashes on its legal victory.

18 and 19 October – The Echo finally publishes full details of the alleged financial irregularities at Cream.

Loosening the gag on newspapers

Lord Nichols of Birkenhead’s ruling has major implications for the ability of the media to publish information based on confidential documents.

The judgment is being interpreted as a victory for press freedom because the subjects of media investigations will now find it harder to rush through gagging orders in breach of confidence cases.

The legal argument centred on how courts interpret Section 12.3 of the Human Rights Act 1998-and, more particularly, on the meaning of the word “likely”.

This section was intended to balance Section 8’s protection of privacy by increasing freedom of speech. Article 12 states that provisional injunctions banning publication of confidential information should only be granted if the court believes the injunction is “likely” to be upheld at trial.

The judge at the Echo’s first hearing ruled that Cream had established the “necessary likelihood” of success. And he defined the meaning of section 12.3 as: “I do not say it is more likely than not, but there is certainly a real prospect of success.”

The Court of Appeal agreed with this definition and questioned whether there was a public interest justification for the disclosure of the information.

Overturning the Appeal Court’s decision, Lord Nichols said: “The principal matter the Echo wishes to publish is ‘incontestably’ a matter of serious public interest. The essential story was one which, whatever its source, no court could properly suppress.”

On the meaning of the word “likely”, he said: “It is capable of encompassing different degrees of likelihood varying from ‘more likely than not’ to ‘may well’.”

He concluded: “Courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably (more likely than not) succeed at trial.”